JIM FUGLIE: View From The Prairie — Of Refineries And Bridges

There is news this week on several fronts involving threats to the North Dakota Bad Lands. There are some long documents to read. Here’s a summary. More when I get done reading them.

THAT DAMN REFINERY

First, Meridian Energy’s proposed oil refinery near Theodore Roosevelt National Park. You probably read that the Dakota Resource Council and its legal ally, the Environmental Law and Policy Center, filed a complaint with the North Dakota Public Service Commission asking the PSC to assume jurisdiction over the siting of the refinery before construction can begin.

On Monday, the PSC accepted the two groups’ complaint and agreed to serve the complaint on Meridian. What that means is that Meridian will now have to respond to the request for a full site evaluation. I’m pretty sure it also means that it cannot start construction of the refinery (Meridian has its Permit to Construct for a month but have not started any work at the site yet) until the PSC hears both sides of the story. The PSC has heard the environmental group’s side in the 17-page complaint, and now it will l get to hear Meridian’s case, arguing that it is not subject to PSC review.

And then, the PSC will decide whether to accept jurisdiction over the plant and require Meridian to undergo a full site review to decide if this is a good place to put a refinery. If it does that (and I won’t be surprised if it does), expect Meridian to go to court and challenge the PSC’s ability to do that. If Meridian doesn’t, expect ELPC to go to court to try to get a judge to order it done.

ELPC’s complaint asks for a cease and desist order, keeping Meridian from going ahead. I’m not sure if Monday’s motion grants that order. I’m waiting for a call back from an attorney to answer that question, but I’m guessing it does. I’ll keep you posted.

THAT DAMN LITTLE MISSOURI BRIDGE

The second long document I have to read is the long-awaited 80-page Draft Environmental Impact Statement on Billings County’s proposed Little Missouri River Crossing north of Medora, which was released a couple of weeks ago.

I say long-awaited because public hearings on this project were held in the summer of 2012, and we’ve been waiting more than six years now to see this document. No one seems to know what the holdup was, but no one was complaining, except the Billings County Commission, which has shelled out millions of dollars to the engineering firm KLJ for it.

The EIS identifies the proposed location of the new bridge — about 12 miles north of Medora — and explains why this is the best location for a new Little Missouri River crossing. The location is on private land — the historic Short Ranch — in spite of the fact that Commission Chairman Jim Arthaud said unequivocally at the public hearings on the project in June 2012 that the bridge would be built on public land.

Apparently KLJ couldn’t find a place to put it on public land. It will be interesting to hear Arthaud try to explain what happened. It will also be interesting to hear him explain why no one has bothered to even contact the Short family to let them know what is going on. The bridge is proposed to cross the river just downstream from the Short’s home place, within eyesight of the ranch headquarters, and no one from the county or the engineering firm has even bothered to talk to them.

The release of the EIS also triggers a new round of public hearings, scheduled in Bismarck and Medora. The DOT ran some huge, 25-column-inch ads in the Bismarck and Medora papers a couple of weeks ago advertising the public meetings, scheduled for next week, in Bismarck and Medora. But then, with no public fanfare, DOT changed the dates to the following week with just a short notice buried deep on the Billings County website.

So here’s the deal. The Medora hearing is now scheduled for 5 p.m. (MDT) July 23, in the Medora Community Center. The Bismarck hearing is at the Courtyard by Marriot Hotel in North Bismarck at 5 p.m. July 26.

These hearings are to gather public input on the bridge project. If you don’t like the idea of another bridge across the Little Missouri, in the middle of no goddam place, you should go to one or both of these hearings and make your feelings known. You should probably read the EIS before you go. You can find links to it here.

THAT OTHER DAMN BRIDGE

The third thing in the news this week is a notice from Bureau of Land Management that it is “seeking public comments regarding an application to authorize an existing single-lane ranch bridge over the Little Missouri River, with an associated access road, in Dunn County.”

You read that right. An application to authorize an existing bridge.

This is the bridge I’ve written about before, built by rancher Wiley Bice, west of Killdeer, on BLM land without BLM permission. The BLM knew nothing about this bridge on its land until I told them about it last year, even though it had been there for a few years. Bice also planted alfalfa on BLM land without permission.

In February, I filed a Freedom of Information Act request to see the application Bice submitted for this bridge, but even though the government is compelled by law to give me that application, it refuses to do so. Now I’ve received a letter asking me to comment on an application I have not seen.

I’ve pretty much lost patience with the BLM. Noted author Ed Abbey called it the Bureau of Livestock and Mines. A friend of mine in Montana called it the Bureau of Leasing and Mining. Both were pretty accurate. I know the BLM has been busy with an oil boom in North Dakota, although it hasn’t been booming so much the last couple of years, but it is apparent to me that it doesn’t even go out and look at its land to see what is going on.

I’m pretty sure no one had looked at the parcel that Wiley Bice built his bridge on — and planted alfalfa on — and built a road on, for more than five years. They’re the Bureau of Land MANAGEMENT. How can it MANAGE our public lands if it never goes look at it to see who’s abusing it?

Anyway, according to this letter, if you go to this website you will find all you need to know — not really, just all they want you to know — about this project, and how to comment. You have until Aug. 13 to respond. I have no idea what will happen after that.

Well, actually, I kind of do. The BLM will conduct an Environmental Assessment (a little bit cheaper version of the document Billings County did for their bridge) on the project, and then tell Bice to go ahead and build his bridge. Oh, wait, it’s already built. Never mind.

In a separate letter I found a copy of Tuesday, North Dakota BLM manager Loren Wikstrom writes that the alternatives being considered in the EA are:

  1. Take no action (leave the bridge, road, pond, and alfalfa fields on the land as-is). This would not achieve the project purpose, but the BLM will analyze the effects to serve as a baseline;
  2. Remove the bridge, road, pond, and alfalfa fields and rehabilitate the public land to a condition similar to that of the surrounding public land.
  3. Sell or exchange the affected public land to the adjacent landowner;
  4. Authorize the bridge, road and pond through rights-of-way, and the alfalfa fields through a lease; and
  5. Authorize only the bridge and access road through a right-of-way, remove the pond and alfalfa fields and rehabilitate the public land. In the event a right-of-way for the bridge and road are granted by the BLM, the site would still remain inaccessible to the public, via road, due to the lack of public roads to the site.

Loren has already told me that No. 5 is their preferred alternative, and that they’re not looking to make Bice  tear down a bridge that cost a couple of million dollars. He’s also told me they are making Bice pay for the cost of the EA and the reclamation. No big deal to Bice. As I wrote here earlier, he sold his oilfield trucking company for about $100 million. This is small change for him.

So I wouldn’t waste time writing letters to the BLM about this. It’s a done deal. A rich guy builds a bridge on public land, gets his hands slapped and lives happily ever after. That’s how the Bureau of Land Management manages your land.

Anyway, those three things are a pretty good indicator that there are still plenty of threats to North Dakota’s Bad Lands. So many it’s hard to keep track. I’ll try to write about each of them as things progress. Somebody has to keep an eye on these bastards.

JIM FUGLIE: View From The Prairie — Who Wants To Invest In A Refinery? Here’s How You Can Do It

I wrote here a couple of weeks go about the beginning of Theodore Roosevelt National Park, created by Congress in 1947, and about the proposed oil refinery that threatens it, a refinery that has now been issued a permit by the state of North Dakota to build the dang thing.

It’s been 70 years since Congress declared that this place in the North Dakota Bad Lands should be protected forever as a national park. Now this California company, Meridian Energy Group Inc., a startup company with no experience building or running a refinery, says it’s going to build a refinery just three miles from the park, alongside the road that runs into Medora.

I want to look at this more carefully. I don’t trust them.

On Jan. 27, 2017, Meridian Energy Group Inc. issued what it called a “Confidential Private Placement Offering” which began:

“Meridian Energy Group, Inc. (‘Meridian’or the ‘Company’) is a closely-held South Dakota corporation that will construct and operate the Davis Refinery, a 55,000 barrel per day high conversion crude oil refinery on a 715-acre site in Billings County, near Belfield, North Dakota, in the heart of the Bakken formation.”

Don’t be fooled by the “South Dakota” in there. They might be incorporated there for tax purposes, but these guys are from Texas and California. And pay special attention to the number 55,000. That’s important. I’ll talk about that in a minute.

And don’t be fooled by the words “Confidential Private Placement Offering” label on the prospectus. I went digging around the Internet and found it for myself, although I bet Meridian is not happy about that, and it may disappear pretty soon, unless the word “confidential” is just another sham put out there by this sleazy company — more about shams in a minute, too.

The first thing you notice in the prospectus, right there in the third line, is that Merdian is selling stock in a refinery that is going to process 55,000 barrels of oil per day. Somebody at Meridian didn’t do their homework. When North Dakota Public Service Commissioner Julie Fedorchak and her fellow commissioners heard about this, they said, “Wait a minute. North Dakota state law says if you are going to process more than 50,000 barrels per day, you have to come to us and let us do a comprehensive site review to determine if that is really a good place to put an oil refinery.”

“Oh, dang,” Meridian responded. “That was a mistake. We didn’t mean 55,000. We meant 49,500 barrels per day. That’s our story, and we’re sticking to it.”

Except that the prospectus is still there, online, selling stock in a refinery that Meridian says is going to process 55,000 barrels per day.

So in spite of that, as I pointed out here a week or so ago, there will be no site review (as of now), which if one took place, would probably determine that this is NOT a good place to put a refinery.

Dang!

Our Health Department has decided that the unproven technology planned for this refinery might — just might because there’s no way to know until it is built and operating — meet federal air quality standards (this is North Dakota, after all, and we’ll plant big wet kisses on the ass of any oil company executive who shows up here with a fat checkbook). So I guess there’s nothing left to do but watch a refinery go up beside Theodore Roosevelt National Park.

Except there is one other possibility. I said earlier I don’t trust Meridian. And I’m not alone. I’ve had more than one person mention in casual conversations, including some people in pretty high positions, that this whole deal sounds suspicious. The project has a price tag of close to a billion dollars, but the stock offering is for only $30 million. Now that Meridian has the permit, it has to find a bank willing to lend it at least three-quarters of a billion dollars. Again, as I mentioned, on unproven technology. Would a bank really do that? What’s the collateral on that if this falls through? A refinery that doesn’t work?

I asked Gov. Doug Burgum if he wouldn’t mind asking his State Securities commissioner, Karen Tyler, to take a look at the prospectus and see if they think this is all on the up and up. I mean, the state does have some responsibility to help protect investors in big deals like this in our state. Apparently he did that. Here’s what his spokesman Mike Nowatzki told me the other day:

“Commissioner Tyler informs me that Meridian is utilizing a federal securities registration exemption under Regulation D Rule 506(c) of the 33 Act. This federal exemption requires that they only accept investments from Accredited Investor — income of $200,000 to $300,000 or net worth of $1 million excluding primary residence.  The exemption largely pre-empts state securities regulatory authority. The Securities Department can require that Meridian put the department on notice that it is soliciting and selling in the state (Note: Meridian has done that), and Securities’ anti-fraud authority is preserved, but it does not have the authority to opine upon and set requirements for their offering documents.”  (emphasis added)

Well, how convenient. Is there any loophole in the law this sleazy company won’t find?

Would I be surprised if I learned down the road, in a few months, that this company never really intended to build an oil refinery here? No, I would not. In fact, I’d be willing to bet all my shares in the company that there’s at least a 50-50 chance this whole thing is a big stock scam designed to make some quick bucks for a few executives and board members.

On the very first page of the “confidential” prospectus, there’s a line that says the total stock offering is for $30 million, but up to 25 percent — $7.5 million — can be used for “cost of issuance,” including “compensation paid to employees of Meridian.” From what I can tell from its website, that might be about a dozen or so people on the “management team” and a few clerical staff dividing up $7.5 million dollars.

But then it also says, “Management’s Discretionary Control over Proceeds — Although the Company anticipates that it will apply the net proceeds of its financing as described herein, Management will have complete discretionary control over the utilization of the funds and there can be no assurance as to the manner or time in which said funds will be utilized.”

So that management team can pay themselves way more than $7.5 million. It can use it all. Good grief. Who would invest in a company like this? Ummmm, maybe somebody looking for a tax write-off?

Well, if it’s a scam, too bad for the investors, but good for us. Except I’m not willing to take a chance. I’m going to keep talking and writing about it. Because if Meridian is serious, and we fail to stop it, shame on us. It will the most egregious example of failed leadership in the history of our state.

I hope Gov. Burgum doesn’t want that to be his legacy.

P.S. Here’s an “Important Notice” from page 3 of Meridian’s “confidential” offering:

“This memorandum contains certain information of a highly confidential and proprietary nature. The receipt of this memorandum constitutes an agreement on the part of the recipient hereof to maintain the confidentiality of the information contained herein or any additional information subsequently delivered in connection herewith. Prospective investors who accept this memorandum or become aware of the information contained herein must understand and comply with the extensive federal and state securities law restrictions placed upon their ability to disclose information contained herein to others or to participate in or otherwise effect or facilitate any transactions relating to any securities of the company. Prospective investors who cannot comply fully with such restrictions should not review the information contained herein and should immedialtely (sic) return this memorandum to the offeror.”

Yikes! Well, golly, I’m not a prospective investor, so I guess I can share that much with you, but I won’t tell you anything else that’s in it because I don’t want to take a chance on going to the pokey. But if you’re interested, and maybe want to invest a buck or two (and if you make 300 grand a year and have a million bucks in the bank you’d like to gamble), just click here and you can read it yourself. Oh, and if it’s disappeared by the time you read this, don’t worry — I’ve got a PDF. Just send me an e-mail and I’ll send it to you.

This story is an edited version of a story that appears in the July 2018 issue of Dakota Country magazine.  It’s a magazine you should be reading. You can subscribe here.

JIM FUGLIE: View From The Prairie —A Short Message About Our National Park

This might be the shortest blog post I’ve ever written. Or will ever write. But it’s an important one, so if you are concerned about the possibility of an oil refinery being built next to Theodore Roosevelt National Park as I am, please take just one minute to read it.

I had a chance encounter with Gov. Doug Burgum this weekend. We had a lengthy, frank and off-the-record discussion about the Davis refinery.

Off-the-record, but I think I can share a few things with you after the conversation without him objecting.

First, I don’t think the governor wants an oil refinery next to our national park any more than you and I do, but I believe he is committed to letting the regulatory process play out, without interfering with his agencies.

Second, I think that he believes, as do many of us, that there will be a legal process before construction begins on the refinery and that he is committed to letting that legal process play out as well.

And third, if the refinery gets its permits and survives a legal challenge, I am starting to get the feeling that we might be able to convince the governor to intervene personally with the company and try to get them to move it away from the park.

To convince him, we need to let the governor know that we will support any efforts he undertakes to get the company to move the refinery away from the national park by sending him an e-mail at governor@nd.gov. We can do that now, or we can do that after the legal process is over. But now might be better.

To quote my new online friend and fellow blogger, Judge Tom Davies: Amen.

JIM FUGLIE: View From The Prairie — Of Refineries And The Public Trust Doctrine

The official comment period has passed on that sleazy company Meridian Energy’s request for an Air Pollution Permit for an oil refinery beside Theodore Roosevelt National Park. I’m guessing the State Health Department got an earful.

Mandan’s Tesoro Refinery. They all pretty much look alike. That white stuff is what you’ll see from Theodore Roosevelt National Park.
Mandan’s Tesoro Refinery. They all pretty much look alike. That white stuff is what you’ll see from Theodore Roosevelt National Park.

Friday, on the last day of comments, my friend,Sarah Vogel, our former state agriculture commissioner and one of the state’s best attorneys, sent me a copy of what she sent to the Health Department. It’s so good, I just have to share it. If the Health Department can issue a permit after reading this, everyone there should be sent packing. And if the governor doesn’t step in after reading this, he should be sent back to Cass County.

Here’s what Sarah wrote:

“The Health Department is well aware of the views of the three statewide-elected officials who serve on the Public Service Commission. They have been clear that they believe that this project should not go forward without a ‘big picture’ overview that would come with a site review by the PSC. See, Bismarck Tribune, ‘Commission urges refinery developers to apply for siting permit,’ December 19, 2017. The majority of the persons testifying at the Health Department’s hearing in mid-January 2018 were opposed to the issuance of the air quality permit by the Health Department, and many urged that the Health Department not grant the permit until such time as a site review by the PSC was completed.

“It appears that the Health Department is evaluating comments on some type of a ‘bright line’ separation between its own concerns, and the concerns by other state agencies such as the PSC, and that it believes it lacks authority to look at any factors other than those strictly dealing with the air quality permit requirements set forth in Health Department regulations.

“Yet, the Department of Health is the lead environmental agency of the State of North Dakota! See N.D.C.C. Section 23-01-01.2 (‘The state department of health is the primary state environmental agency.’) Because of its additional role as the primary environmental agency, the Health Department should take a broader view consistent with the Public Trust Doctrine that underlies the duties and operations of all state agencies, including the Department of Health.

“As explained by the North Dakota Supreme Court, the Public Trust Doctrine is part of the common law of this state and overlays and informs the actions of the state as those actions affect the citizens of North Dakota’s critical reliance on clean water and other resources such as clean air. See, e.g., United Plainsmen Association v. North Dakota Water Conservation Commission, 247 N.W.2d 457, at 460-464 (ND 1976). See, also, State ex rel. Sprynczynatyk v. Mills, 523 NW 2d 537, at 540 ND 1974) (‘North Dakota could not totally abdicate its interest to private parties because it held that interest, by virtue of its sovereignty, in trust for the public.’)

“The Public Trust Doctrine is part of the overarching principles that should govern North Dakota governmental officials and especially those at the Department of Health See N.D.C.C. Section 23-01-01.2, supra.

“I recommend that the Health Department consider the Public Trust Doctrine in determining whether it, as the primary environmental agency, has a duty on behalf of the citizens of North Dakota to coordinate with the PSC to insure that all environmental factors are appropriately considered at the appropriate time and in the appropriate sequence.

“The Legislature’s use of the word ‘primary’ necessarily implies a leadership role with other secondary agencies for environmental issues. Here the PSC is pleading for the opportunity to do its job, and review the site of a project that will have a huge effect on western North Dakota in advance of issuance of a permit. The stakes are even higher since North Dakota’s premier attraction, the Theodore Roosevelt National Park, is extremely close to the site for the proposed refinery. Surely, the Health Department has the discretion to defer its decision on an air quality permit for Meridian’s proposed refinery until the PSC has the opportunity to do a thorough and thoughtful determination of the suitability of the site in keeping with state government’s duty to protect the public’s interest.

“The idea that a Meridian claim of a 500 barrel disparity in anticipated production could prevent this critical and essential review is a weak rationale to avoid PSC review. To illustrate, why should the Department of Health take at face value Meridian’s current assertion that it will produce 500 barrels of oil less than the cutoff for mandatory PSC review? As the Department of Health is well aware, Meridian has a history of changing its numbers based upon the audience it is addressing. One set of numbers is provided on Wall Street for potential investors and stockholders; another set of numbers is provided to officials of the State of North Dakota. The latest illustration of the unreliability of Meridian’s public statements is its recent press release on the Health Department’s January hearing which asserted that most of the people testifying were in favor of the project. In contrast, the Bismarck Tribune’s story by Amy Dalrymple said exactly the opposite.

“In conclusion, the permit should be denied or the application should be held in suspense until a proper site review is conducted by the PSC.”

Well. Thank you, Sarah.

I have no doubt the Public Service Commissioners will read this and agree with Sarah. But as long as the Faustian refinery developers hold to their estimate of 49,500 barrels per day (99 percent of the 50,000 bpd that triggers a site review), the PSC is helpless.

But are you reading this, Doug Burgum? Because, ultimately, you’re the man responsible for upholding the Public Trust Doctrine, on behalf of the citizens of your state. The Health Department works for you. You’re the governor. You asked for the job. Now do your job. The Supreme Court has already upheld the Public Trust Doctrine. Do you really want to be on the same side — the wrong side — of a lawsuit with Meridian Energy, governor, and on the opposite side of your own Public Service Commission, when someone files suit to force you to uphold the Public Trust Doctrine?